As the new government prepares to deliver its maiden budget on 10 July, its plans to revive economic growth must include the strengthening of the education system.

In the last decade, the Union government’s contribution to the overall education expenditure increased substantially from 14% to 25%. Currently, India spends ₹ 3.5 trillion, or 3% of its gross domestic product (GDP), on education every year. The new government has promised to increase this spending to 6% of GDP. However, evidence from our existing input-based system shows that improvement in inputs does not necessarily correlate with improved outcomes. Today, 97% of children are enrolled in Class 1. However, only 35% reach Class 12. The 2013 ASER survey reveals that nearly half Class 5 children are unable to read Class 2 level text. India’s children may be in school but they are certainly not learning.

Increased spending must be accompanied by a paradigm shift from an input-oriented system—that focuses on more infrastructure and teachers—to an outcomes-based system. So what can the Centre do differently to promote an outcomes-based system?

First, the ministry of human resource development must revamp its results framework document (RFD) to focus on learning outcomes. The RFD, which is used to review the ministry’s performance, presently measures success of central government schemes, largely based on financial outlays, activities and input. Redesigning the RFD to focus on outcomes will enhance the effectiveness of our public spend in achieving improved learning for all our children as outlined in the 12th Five-Year Plan.

Second, the Union government must start monitoring state performance for all centrally-sponsored schemes and tie a part of its funding to improvement in outcomes. This will improve state accountability and motivate them to enhance implementation. For instance, 1.3 million anganwadi centres function under the Integrated Child Development Scheme (ICDS), with the mandate to provide health, nutrition and pre-primary education to children. And yet, nearly half children in Class 1 can’t even recognize letters. The result might have been drastically different if states were aware that a portion of their funding was contingent on improvement in learning.

Third, the Union government must aim to increase investments in such initiatives that will strengthen the education system in the long term. The current spend on strategic initiatives linked to quality such as teacher education and development, headmaster training, student learning assessments, R&D and ICT is less than 2% of the education budget. Increasing these investments will allow for greater quality in the system.

Finally, a portion of the budget allocation to states should be contingent upon the adoption of education policies that focus on student learning. In specific, the the Union government can create a “state performance fund" to incentivize states that implement measures such as large-scale student assessments, merit-based head master selection, specialised leadership training of headmasters and transparent teacher recruitment process.

In the US, President Barack Obama’s “Race To The Top" programme has done exactly this. In 2009, the federal government created a performance fund of $4.35 billion (just 0.2% of the overall education budget), and used this to provide competitive grants to reward states for pioneering education innovation and reform. Fortyfive of the 50 US states modified their policies to access this pool of funds.

In India, central schemes such as Jawaharlal Nehru National Urban Renewal Mission have successfully used a similar approach for influencing state policies. The new budget could be a turning point in India’s fight against education inequity. The government should use its as an opportunity for a drive towards quality education for all.